You are not your credit score: Credit and self-esteem

When people have low credit scores, it can affect more than just their ability to secure credit cards and other loans. It can be a devastating blow to their self-esteem, as well.

It doesn't have to be that way, experts say. By changing your focus and taking small steps to distance yourself from your credit score, you can minimize the impact of those three digits on your psyche.

People look to numbers -- weight, bank account balance, credit score and others -- to give them a sense of worth, says Dr. Ramani Durvasula, a licensed clinical psychologist and psychology professor at California State University, Los Angeles. "We are a very materialistic society, and as a result, a bad credit score can really erode a person's self-esteem. But no number tells us how good we are," she said.

Still, some people persist in believing that a low credit score means that they are "stupid," "bad" or somehow less than others.

The dark impact of bad credit
Faheem Walji experienced this phenomenon after moving to the United States from Tanzania six years ago. As a college student, Walji had no concept of how credit worked. As a result, he had several bills and accounts go to collections, with a plummeting score of 563. He became depressed.

After not being able to secure a loan for a car to transport him to his job, "I was gutted and really felt like I had hit a new low," he says. Then, when he tried to rent a car with a debit card, a rental company ran his credit report and then mocked him, saying he would never be able to rent a car.

Incidents such as this tend to reinforce a person's negative ideas about their self-worth as it relates to their credit.

"When a faceless entity is making decisions on your creditworthiness based solely on a credit score, then you believe they are making a decision about you as a person," says Jay Fleischman, a lawyer who helps people file for bankruptcy in New York. "Rejection is always taken personally. If you apply for 10 jobs and remain unemployed, your ego takes a hit."

Durvasula said these negative feelings tend to hold people back from viewing the situation from an empowered position.

"Anytime somebody frames themselves from a negative schema -- 'I am a bad credit score,' for example -- they're starting from a place of damage," she says. It can be very difficult to break out of that mindset.

Good credit makes you feel good
On the other hand, when people have good credit scores, they are more likely to feel proud and even self-congratulatory, says Durvasula.

People with good credit scores are more likely than those with poor credit to advocate for themselves in situations where they feel they deserve better rates or terms, she said.

For example, if someone with a high credit score is occasionally late on a payment, that person is more likely to call a credit card company to negotiate for waived late fees and finance charges. "You are safeguarding a piece of you that you feel good about," says Durvasula.

On the other hand, someone with a low score and a history of late payments is less likely to make that call, even when that person could benefit most by taking action.

"The fight is out of you. You lose your strength when it comes to self-advocacy," says Durvasula. As a result, your credit can slip even lower.

Divorce your self-esteem from your credit scoreFor Walji, it wasn't easy to break out of the negative mindset and start taking steps toward improving his credit.

"I guess I just kept ignoring the negative thoughts, even though I knew in the back of my mind that this was toxic and not good for me," he says. "I just didn't want to face the reality of dealing with them. I didn't grasp the concept of how life-changing good credit can be."

Along with the help of his sister and advice from the forums at MyFICO.com, he slowly pulled himself out of debt. He now works for a credit union in New York and has built his score to higher than 720. He also gives seminars about debt management and credit scores through his employer, hoping to target international students who are unfamiliar with American credit, as he once was.

Experts say the solution to rebuilding your self-esteem after bad credit is to try not to equate yourself with the score, and to take small steps to recover from rock bottom.

"A good credit score doesn't make you a good person or a bad person, just someone who either is or is not reliably paying debt in a timely fashion," Fleischman says.

Stop growing debt of any sort and concentrate on paying the existing debt off over time.

"This will reduce your reliance on credit and allow you to begin to value yourself on who you are as a person and not as a dollar sign," he says. "If you want a measure of success and satisfaction, look at your growing bank account."

When you're faced with low self-esteem, Durvasula said the motivation to change can be minimal. "People should do what they can to take control. Part of that may mean getting in touch with a financial adviser."

She says there's no time like the present to do so. "It is a new year. It's almost like a fresh financial start. It's exactly the time people should be asking themselves, 'How can I take better control of my finances?'"

And always remember that your credit score does not define who you are, she said. "The number is a canary in a coal mine. It's a story of financial history, but every story can be rewritten."

Published: January 14, 2011

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